'An eye for an eye a tooth for a tooth?' What does the Reciprocity Law say that Lula wants to use against new US tariffs

President Lula signed in 2025 the decree that regulates the Economic Reciprocity Law Reuters The Brazilian government said this Thursday (16/07) that it intends to use the Economic Reciprocity Law against a new tariff that was announced by the United States government against Brazil. The Office of the United States Trade Representative (USTR) announced the end of the investigation into Brazilian trade practices considered unfair by the American government and the application of 25% tariffs on a series of Brazilian products exported to the USA. The decision is endorsed by American President Donald Trump and will come into force on July 22. The tariff was justified by alleging practices such as favoring Pix, access to the ethanol market and problems related to corruption and deforestation. In a statement, the Brazilian government repudiated the announced decision and said that it will begin the procedures to activate the Reciprocity Law approved by the National Congress with the World Trade Organization (WTO). The Economic Reciprocity Law is a new instrument approved by Congress in April 2025 and sanctioned by President Luiz Inácio Lula da Silva in July of the same year — in the same week that Donald Trump had announced 50% tariffs on Brazilian products. The decree establishes in which cases and how the Brazilian government can retaliate against measures such as those imposed by Trump. The text details the "criteria for suspending commercial concessions, investments and obligations relating to intellectual property rights in response to unilateral measures adopted by a country or economic bloc that negatively impact Brazilian international competitiveness". The drafting of the decree that regulates the law was one of the first steps taken by the Brazilian government after the announcement of Trump's tariffs. The Economic Reciprocity Law was approved by a large majority in the National Congress, in an unusual movement by the government and opposition benches which, in recent years, have increasingly rarely voted in the same direction. On Tuesday (14/07), before the official announcement of the new American tariffs, the Minister of Finance, Dario Durigan, stated that the Brazilian government could adopt reciprocity if the United States confirmed a new tariff against Brazil. "We ended up suspending the reciprocity process, following the law of the National Congress, when there was a kind of reversal in the tariff. With this now, I think it is likely that we, once President Lula has been consulted, will resume the reciprocity process. All of this within a scenario of cautious evaluation", he told journalists. The announcement was already expected by diplomats interviewed privately by BBC News Brasil and by the Minister of Development, Industry, Commerce and Services (MDIC), Márcio Elias Rosa. In an interview given two weeks ago to BBC News Brasil, the minister stated that the Brazilian government was still trying to negotiate a last-minute agreement with Washington, but already admitted the possibility of an unfavorable outcome for the country. What does the law say? According to the project approved by Congress and sanctioned by the president, the Economic Reciprocity Law can be used in three circumstances. The first occurs when a country or economic bloc unilaterally threatens or imposes trade, financial or investment barriers with the aim of interfering in Brazil's "sovereign" decisions. The second possibility of using the law is if a country or economic bloc violates the terms of a trade agreement with Brazil, harming the country and Brazilian companies. The third possibility is the imposition of commercial measures based on environmental requirements that are more restrictive than those provided for by Brazilian law. A practical example would be to prevent the purchase of Brazilian agricultural commodities produced in the Cerrado or the Amazon in accordance with Brazilian environmental standards on the grounds that the environmental standards of the country or purchasing bloc had been violated by Brazilian producers. If this requirement is unilateral and not based on multilateral agreements, and has a negative impact on the export of Brazilian products, Brazil could consider it a measure subject to retaliation under this law. The government announced in a statement that it will initiate procedures for the Reciprocity Law to retaliate against Trump's new tariffs EPA/SHUTTERSTOCK What are the government's weapons? The decree also lists the mechanisms that the government has to react to tariffs. The main tool is the imposition of tariffs on goods or services imported from the country that started the tariff war. Under the decree, Brazil may apply additional tariffs or surcharges to specific products. The idea is to make them more expensive and, consequently, less competitive in the Brazilian market. Another mechanism is the possibility of Brazil failing to comply with the terms of trade agreements signed with the "aggressor" country or bloc. This would have an impact on import or export quotas previously agreed between the parties. Regulation of the law establishes the rules for applying countermeasures on taxes that could harm Brazilian exports Reuters An eye for an eye, a tooth for a tooth? Despite being called the "Economic Reciprocity Law", the decree that regulated the text maintained the idea that its application should not follow the logic of "an eye for an eye, a tooth for a tooth" in an unrestricted manner. The law, for example, stipulates that the imposition of retaliatory measures must "minimize the impact on economic activity and avoid administrative burdens and costs." This determination is the result of the government and Congress' concern that tariffs against certain imported products could end up harming production chains already installed in Brazil that depend on these inputs for the production of goods or services in the country. The decree also provides the steps for adopting retaliatory measures. The first will be the formation of committees to evaluate the case and the holding of public consultations with representatives of interested parties. In practice, the government has already started this phase by setting up a commission with businesspeople from different sectors to discuss the government's response. In the decree signed by President Lula, the group evaluating the case is called the "Interministerial Committee for Negotiation and Economic and Commercial Countermeasures". It is chaired by the Minister of Development, Industry, Commerce and Services (also vice-president Geraldo Alckmin), and has the participation of the ministries of the Civil House, Finance and Foreign Affairs. Brazilian countermeasures are also evaluated by the Chamber of Foreign Commerce (Camex), where representatives from public administration and private sectors of the economy will participate. The second stage involves setting deadlines for analyzing the demands sent by the consulted sectors. The third step is the suggestion and implementation of the measures, with possible diplomatic consultations and negotiations. The decree also stipulates that the Executive Branch is authorized to adopt retaliation on a provisional basis while the government carries out the previous steps. The text also provides that the government must set up a commission to monitor retaliations and that it may revoke or change them based on ongoing diplomatic negotiations. * With reporting by Leandro Prazeres, from BBC News Brasil in Brasília.